“Black hole”, as New Statesman readers know, is a rubbish term. What Jeremy Hunt was trying to do in today’s Autumn Statement was convince the markets, from whom he borrows money, that he has tight control over government spending and revenues. This is about politics as much as economics; about how things look, as much as the arithmetic; about authority.
And Hunt, to be fair, absolutely looked the part. He was precise, serious and calm. He used words like honesty and transparency. He insisted again and again on compassion. It was 43 minutes before he even uttered the word Brexit.
But there was a problem at the heart of what was, effectively, the relaunch of a new centre-right government. The gap in the finances that had to be filled, now of around £55 billion, was to be made up, said the Treasury, of 55 per cent in spending cuts and 45 per cent in tax rises.
But there were no spending cuts. Not really. Most government departments are going to have to struggle with inflation unaided and that will cause real pain across many different parts of the economy but, to make the numbers add up, there were no specific reductions.
When I asked Treasury officials to list the areas in which spending would be cut before the next election, they couldn’t give me an answer. Umm. There would be spending reviews. Aah. There would be – eventually, maybe – efficiencies. This year and next, however, the official figures show that government spending goes up and it’s only in election year, 2024-5, that the minus signs appear.
In ordinary life if you want to hide something, you place it behind another object. In the more abstract realm of political economics you throw it as hard as possible into the future. And if it lands in the lap of a future Labour government, so much the better.
Add to this two other key aspects of the Autumn Statement, and the true meaning comes into sharper focus still. First, the tax rises do land on many broader shoulders – there is the expansion of the 45p income tax band, the windfall taxes, the taxes on share dividends, the move on capital gains tax. Second, Hunt has cleverly given himself institutional and human-shield protection of exactly the kind that Kwasi Kwarteng and Liz Truss disdained in their disastrous mini-Budget in September.
They tried to dodge the Office for Budget Responsibility (OBR). Hunt has embraced it. They were sniffy about the Bank of England’s record. He went out of his way to praise it: “It now has my wholehearted support… I will not be changing its remit.” You could almost hear the sound of institutional London closing ranks.
But Hunt had a personal protection squad as well. What of that extra spending on the NHS, much less than it had asked for? Step forward Amanda Pritchard, its chief executive: “This settlement should provide sufficient funding for the NHS to fulfil its key priorities.” What of NHS reform, which arouses such suspicion among the opposition? Step forward, as the government’s new adviser, one Patricia Hewitt, former Labour health secretary.
Think of all that; think of the way Hunt emphasised the pain-today of tax rises and delayed any actual spending cuts until after the next election; and then pile on his cheerful swiping of Labour policies such as windfall taxes and a new personnel plan for NHS. It’s clear that this was a carefully executed assault, less on a black hole than on an opposition currently some 20 percentage points ahead in the opinion polls.
So far, so clever. No wonder many experienced journalists were shaking their heads and muttering about the wily politics of George Osborne, as Jeremy Hunt sat down to a bromance hug from Rishi Sunak. The danger is that it might be a tad too clever.
Focusing so much on tax rises, rather than spending cuts, is a sure way to inflame the already easily riled right of the Tory party, and there are signs of that happening already. UK plc is currently in the hands of more moderate, consensual Conservatives than has been the case for a long time: the question is, how long will the Crazy Gang tolerate this unusual situation?
Nor is there any sign that the country as a whole will nod and say thank you. Britain has seen public services so stretched for so long that the average patient, the average parent and the average shopper are unlikely to see things improving in the real world as inflation rolls on through the winter. Real incomes are plunging.
All the signs are that the Tory version of Brexit, now rejected by a larger proportion in opinion polling than ever before, is percolating through as a key explanation for our economic performance. Michael Saunders, formerly of the Bank of England’s monetary policy committee, recently told Bloomberg: “The UK economy as a whole has been permanently damaged by Brexit… If we hadn’t had Brexit we wouldn’t be talking about an austerity budget this week.”
So although Hunt was right to tell the Commons this week that it was Russia’s war in Ukraine which had fuelled inflation and the energy crisis, and that the hugely expensive but essential pandemic measures had to be paid for, the trouble is that too much of the public knows there’s more to the story than that. And feels it too.